LONDON (AFX) - The euro was trading above the 0.98 usd level for the first time since February 2000 in midday trade as confidence in the dollar continued to ebb away, dealers said. Having surged to a new high of 0.9818 usd, euro/dollar settled back around the 0.98 level, though market participants remain confident that another march ahead is imminent. "Rising public deficits, a ballooning current account deficit, lagging investment and a consumer sector suddenly looking shaky indicates that foreign accounts might not only be unwilling to allocate additional funds to the US, but might also consider liquidating assets," said Hans Redeker, global head of forex strategy at BNP Paribas. "We underline the risk of a sharp dollar pullback, and the 1.02 target might be reached earlier than assumed," he added. Though the correction in the dollar in the last few months may be beneficial to the performance of the global economy, Redeker warned that a "sharp and sudden" decline bears not only risks for the US economy, but could have "deflationary global consequences" as well. Michael Klawitter, currency strategist at WestLB, also thinks dollar risks remain to the downside. "The deteriorating situation in Brazil, falling US equity markets as well as new terror announcements made by a spokesman of bin Laden will keep the dollar under pressure," he said. Meanwhile, the dollar remained under pressure against the yen as well, despite further intervention by the Bank of Japan. The BoJ intervened on behalf of the Ministry of Finance for the fifth time in the last month at around the 121 level. Dealers reckon the BoJ may have splashed out anything up to 3 bln usd in the latest round of intervention. Finance Minister Masajuro Shiokawa said the yen's recent gains have been "unfavourable", adding that further action will be taken if necessary. Rob Hayward, currency strategist at ABN Amro, said the markets were testing the BoJ and said he would not be surprised if another round of intervention was initiated this afternoon.